Greece now defines a great economic depression

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by Shaun Richards

One of the issues in economics is that transferring the theoretical concepts to real life often has problems. Before we even get to the conceptual issues there is the simple concept of time which means that by the time we have the full data on something it can already be too late. However today’s releases from Greece will update us on what Elton John described well.

It’s sad, so sad
It’s a sad, sad situation
And it’s getting more and more absurd
It’s sad, so sad
Why can’t we talk it over?
Oh, it seems to me
That sorry seems to be the hardest word

Looking at the last decade or so is grim reading and it starts symbolically because the Greek statistics office sends you to a page which does not exist. But once you bypass that if we look back to the pre crisis era and I mean just before the first bailout then Greek GDP at current prices was 54.1 billion Euros ( first quarter 2010) and in the last quarter of 2020 it was 42.5 billion at current prices.

As that sinks in and there is an element of shock in that size decline you may think that the Covid pandemic is just bad luck. But as I have regularly pointed out if you mess around for years and years another recession or problem was bound to come along. So the scale of this downturn is unlucky but not one occurring. We can refine our numbers in terms of scale by switching to a chain-linked index which tells us that the 104.6 of the opening of 2010 has been replaced by 77.6 at the end of last year.

An economic depression has two features of which the first is the economic decline and the second is how long it lasts. For example the Covid-19 depression has been deep but we hope it will be short. Care is needed as like wars these sort of things are always supposed to be over by Christmas and I note many who suggested it would end in 2020 have simply recycled that for 2021. Greece has been a case of it being both deep and long lasting. Looking back remember when Christine Lagarde was telling us the bailout was a case of “shock and awe” and economic growth of 2.1% for 2012 was forecast followed by 2% per annum ad infinitum?

There is another way of looking at such a thing and it is to compare yourself with your peers. Sadly things just get worse as whilst the composition of the Euro area has changed it grew by 8% over the same period.

What about now?


Regular readers will know that in general I am a fan of lower prices but there can be special cases and Greece is certainly one of those.

The CPI in February 2021 compared with February 2020, decreased by 1.3%. In February 2020, the annual rate of change of the CPI was 0.2% ……The average CPI for the twelve – month period from March 2020 to February 2021, compared with the corresponding index for the period
March 2019 to February 2020 decreased by 1.6%.

As you can see there are actual deflation dangers here as opposed to the usual media panic which is anything but. What I mean by that is that we have falling prices with pretty much everything else falling.

Overall the issue is different as since 2009 Greece has had inflation of around 5% in total so it has not been something which has made things worse. Also looking at the detail health (~2%) and education (~12%) have got cheaper which is very rare so the numbers need an investigation I think.


These are important figures on several levels. In ordinary times they have importance. But in the context of Greece the austerity programme had something of a kicker because of the International Monetary Fund involvement as in the past its programmes were set to improve trade figures. In that context the numbers below are really poor.

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The deficit of the trade balance, in January 2021 amounted to 1,442.9 million euros (1,733.7 million dollars) in comparison with 1,893.0 million euros (2,075.9 million dollars) in January 2020, recording a drop, in euros, of 23.8%..

There are several levels to this so let us start from the fact that Greece had a deficit in spite of all the austerity pre pandemic. If we now go to the Bank of Greece and add in services mostly because of the importance of services we see that there was an issue allowing for that.

In 2020, the current account showed a deficit of €11.2 billion, up by €8.4 billion year-on-year. This development is almost exclusively due to a decline in the services surplus, which was partly offset mainly by a €4.3 billion drop in the balance of goods deficit

The point here is that Greece still had a deficit pre pandemic. As to the pandemic it wreaked havoc on the tourism numbers.

A significant decrease in the services surplus is attributable to a deterioration in, primarily, the travel services balance and, secondarily, the transport balance, while the other services balance improved. Both travel receipts and non-residents’ arrivals fell by 76.5% year-on-year. Sea transport receipts dropped by 15.3%.

If we now switch back to January of this year it is worrying that imports fell faster than exports as we have seen this be a signal for an economic decline before.

The total value of imports-arrivals, in January 2021 amounted to 3,953.2 million euros (4,799.9 million dollars) in comparison with 4,747.7 million euros (5,254.2 million dollars) in January 2020, recording a drop, in euros, of 16.7%………The total value of exports-dispatches, in January 2021 amounted to 2,510.3 million euros (3,066.2 million dollars) in
comparison with 2,854.7 million euros (3,178.3 million dollars) in January 2020, recording a drop, in euros, of 12.1%

The decline in trade has mostly been outside the EU. Also as people often ask what does Greece export? Well in January it was manufactured goods across a range of categories. Followed by mineral fuels and lubricants and the vast majority goes outside the EU. Then chemicals and food exports are similar.


We find a little more cheer here as we see Greece is seeing the bounce we have seen elsewhere.

he Overall Industrial Production Index in January 2021 recorded an increase of 3.4% compared with January 2020. The Overall IPI in January 2020 decreased by 0.6% compared with the corresponding index in January 2019.

However the 2019 decline is troubling as after all Greece was supposed to be surging forwards then. Also if we look back and use 2015 as our base then manufacturing output was at 101.3.


At the moment Greece is mired in two particular problems.

The third wave of the coronavirus pandemic ramped the number of daily cases up to 3,215 on Tuesday, in what was a record figure for this year, approaching those seen at the peak of the previous wave.

Also we are back to riots there with both sides accusing the others of brutality. In terms of hopes well world trade coming back would be a boost.

Greece remains the world’s largest shipowning nation. Though the country accounts for only 0.16% of the world’s population, Greek shipowners own 20.67% of global tonnage and 54.28% of the European Union (EU)-controlled tonnage (Figure 1)9. Between 2007 and 2019, Greek shipowners have more than doubled the carrying capacity of their fleet ( Greek shipping and the economy)

Although we have noted in the past the problems with taxing this area.

As to the central bankers priority the housing market it seems to have missed the reforms that have so regularly been trumpeted.

The result is that the property market is in zombie mode, in that the number of transactions completed is minimal, also damaging the state that is deprived of significant tax takings. ( Kathimerini)

There is some hope that the Brits might make some sort of rescue effort although in truth it feels like a PR release dressed up as news

The islands of the Cyclades, Lefkada and Cephalonia in the Ionian Sea, as well as the capital Athens and the nearby islands (e.g. Spetses, Hydra etc) are today the most expensive areas for investing in the property market across Greece. Nevertheless investment interest in them from abroad remains particularly strong and looks set to surge as soon as the health crisis is over. ( Kathimerini )

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